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Media releases relating to the Emergency Services Levy Insurance Monitor are attached below, including a pdf version. If further information is needed, please contact us on: enquiries@eslinsurancemonitor.nsw.gov.au

2017

July

The Insurance Monitor has issued new guidelines on prohibition against price exploitation and prohibition on engaging in false or misleading conduct and invited insurance company CEO’s to publicly commit to adopting systems and procedures to ensure their compliance with them, in the wake of the NSW Government’s deferral of the Fire and Emergency Services Levy (FESL).

Under the deferral, emergency services funding (the Emergency Services Levy, ESL) will continue to be collected through property insurance policies and not be collected alongside council rates from 1 July 2017.

“I have requested each insurance company CEO to pledge that they will do the right thing and comply with the guidelines, which include providing clear written communications to their policyholders about the levy’s continuation on property insurance policies,” Insurance Monitor Professor Fels AO said.

“The guidelines enforce the requirement for insurers to specify how much ESL they will charge in renewal notices, and also for the first time, in online quotations.

“Monitoring of the industry is occurring to ensure that insurers do not over-collect the amount of ESL required of them from their policyholders.

“We have already communicated with the largest insurers in NSW to outline our expectations of the ESL’s continuation. Our new guidelines further enforce this.

“A two year transition period has been established (2017-2018 and 2018-2019). I expect each insurer to be able to justify the approach they adopt in continuing the levy.

“We have extensive powers to collect data and question insurers.”

Professor Fels said policyholders should not have to pay more than is necessary to recover the ESL, plus the associated GST and Duty over the extended two year period.

“Insurers have a duty to fully comply with the law. Penalties up to $10 million apply to insurers who do the wrong thing.

“The levy is a financial year payment that funds the annual NSW emergency services budget which insurers now remain required to collect.

“We have issued detailed guidance to insurers and have strong powers. We will not hesitate to use them to protect insurance consumers.”

Professor Fels added that it pays for people to compare their premium price to last years and to shop around for the best deal.

“I encourage consumers to compare and shop around. My office has previously published data which revealed large differences, in some instances well over a thousand dollars, in the price of insurance for similar homes, with similar risks, in the same suburb depending on who you insure with.” Professor Fels said.

The Insurance Monitor’s price monitoring powers have been extended from December 2018 to 30 June 2020.

CEO declarations are due to the Insurance Monitor by 1 September 2017. Declarations can be expected to influence the Insurance Monitor’s risk-based compliance and enforcement activities. View the new guidelines at eslinsurancemonitor.nsw.gov.au.

The introduction of the FESL was deferred by the NSW Government on 30 May 2017.

May

Deputy Insurance Monitor Professor David Cousins AM said he was concerned and sceptical about claims made in the media by the Insurance Council of Australia stating “insurers will potentially pass on tens of millions of dollars in costs to customers along with the resumption of the Emergency Services Levy (ESL)”* from 1 July.

“The Insurance Monitor’s current powers provide for the ability to take action against insurers who charge unreasonably high premiums, including where they overstate the administrative or other costs associated with supplying insurance,” Deputy Insurance Monitor Professor Cousins said.

“Insurance companies should not assume they can pass on such costs onto policyholders. We will subject such claims to scrutiny.

“The Insurance Monitor is seeking clarification from the NSW Government on a number of matters relating to the policy change yesterday; where the planned introduction of the Fire and Emergency Services Levy (FESL) from 1 July was deferred, meaning the ESL regime will stay in place.

“We are consulting with the NSW Government on practical implications regarding the reform deferral.

“In the meantime we are continuing to monitor the industry and if we have any concerns about unreasonably high premiums or false or misleading conduct – we will take action.

“Our strong powers remain. Insurers can receive penalties up to $10 million for misleading policyholders or charging unreasonably high insurance prices.”

The NSW Government will defer the introduction of the Fire and Emergency Services Levy (FESL) to ensure small to medium businesses do not face an unreasonable burden in their contribution to the State’s fire and emergency services, Premier Gladys Berejiklian and Treasurer Dominic Perrottet announced today.

Ms Berejiklian said that in the majority of cases across NSW, fully insured people would be better off under the new system, however it had become clear that some fully insured businesses were facing unintended consequences.

“We are a Government that listens, and we have heard the concerns from the community, and we will take the time to get this right,” Ms Berejiklian said.

“While the new system produces fairer outcomes in the majority of cases, some people – particularly in the commercial and industrial sectors – are worse off by too much under the current model, and that is not what we intended.”

Mr Perrottet said that in a number of cases identified so far, the lived experience has not matched the intention of the reform for commercial and industrial sectors, particularly for small and medium businesses.

“The FESL is a complex reform and we always knew there would be challenges during the transition phase,” Mr Perrottet said.

“It’s not enough for this reform to work on paper – its real-life implementation has real life consequences for families and businesses, and we need to make sure they are not placed under unfair strain.

“We are committed to reducing NSW’s high rates of under insurance and to making the funding of our fire and emergency services fairer – but we want to get this right.”

The NSW Government will work with local government, fire and emergency services, the insurance industry and other stakeholders to find a better and fairer path forward.

The Fire and Emergency Services Levy will continue to be collected via insurance policies until the NSW Government has completed its review of the policy, and the funding requirements of fire and emergency services agencies will be met in full.

The FESL is revenue neutral, raising no more than the amount required to fund the State’s fire and emergency services.

The Insurance Monitor will oversee a smooth continuation of the existing system and ensure insurance companies collect only the amounts necessary to meet fire and emergency services funding requirements.

“The ESL charged on NSW property insurance has been declining. When looking across 12 insurers, ESL rates declined from around 20% in January to around 7% in May 2017, for people purchasing now this signals a decline of 13 percentage points,” Professor Fels said.

“I expect to see further significant reductions in premiums in the period leading up to 1 July 2017 as ESL rates continue the process of falling to zero.”

The Insurance Monitor also specially requested data from the Australian Bureau of Statistics (ABS). The data looks at the total amount a customer paid for a new or renewed policy (house and contents). Insurance prices measured by the ABS declined by almost 3% in the March quarter of 2017 in Sydney, but collectively rose in all other capital cities by around 1%, confirming the benefits to Sydney-siders.

“In short, the benefits of the ESL reform are already being experienced in advance of 1 July 2017 for people who are currently renewing their policies or taking out a new policy,” Professor Fels said.

“The Insurance Monitor has released data relating to standard property insurance quotes across 11 areas in NSW, covering 12 insurers. It shows property insurance quotes have decreased across all 11 locations covered by the survey since it commenced in October 2016.

“When looking at individual quotes for Medlow Bath, for example, some quotes were between $150 and $650 lower in May 2017 than October 2016 levels. Smaller reductions were reported at the other sampled locations, but even so falls up to $300 are seen at Concord and Bradbury.

“The table also shows continuing large differences in premium quotes for the same property in the same location, depending on who you insure with.

“In Bradbury (South West Sydney), for example, it could cost almost 2.5 times higher depending on who you insure with – that could be a saving of over $1,500.

“This indicates the importance of shopping around for quotes when renewing insurance or taking out a policy.

“Quotations have been falling significantly from October 2016 to May 2017. Our new table shows an average saving of around $200 for those who quoted for a new policy in May across the board.

“However, large variations between individual insurers exist. For example, reductions from October 2016 to May 2017 can vary from $73 up to almost $650 depending on where you are and who you insure with. These numbers are based on samples and are indicative only.

“These ‘advance’ savings are likely to understate the full savings that will later take place when the ESL is totally removed from 1 July 2017.

“Premium falls up to May 2017 do not reflect the full fall to zero in ESL that will occur from 1 July 2017. Further, but smaller, falls for these policyholders, will occur in the last quarter of the 2018 financial year.”

From 1 July funding for NSW emergency services will no longer be collected through property insurance policies – it will paid by all property owners, collected alongside council rates (showing as a Fire and Emergency Services Levy or FESL). Penalties up to $10 million dollars apply to insurers who do the wrong thing when the ESL is taken off property insurance.

Major NSW insurance companies have been required to provide evidence and answer questions about how they will ensure customers get savings they are entitled to from the emergency services levy reform at a public hearing in Sydney today.

The Public Inquiry to be conducted by the Insurance Monitor, Professor Allan Fels AO and Deputy Insurance Monitor Professor David Cousins AM, will look at how insurers are removing the Emergency Services Levy (ESL) from their pricing, influences on insurance pricing, including pricing methodologies and current revenue and costs drivers.

By 1 July 2017, insurers should have removed the ESL from their pricing and prices should have fallen significantly as a result, Professor Fels said.

“The Inquiry will be examining how insurers are communicating these changes to policyholders,” Professor Fels said.

“The evidence suggests that the public does not have a high awareness of the operation of the insurance based emergency services funding scheme or its impact on insurance premiums.”

“Given the importance of clear and open communication on these matters, a prescribed Section 30 notice has been issued requiring insurers to provide policyholders a comparison of this year’s premium with last year’s premium when issued with their premium renewal notices.”

The Insurance Monitor has for over a year indicated its desire that insurers adopt this innovation. Submissions from consumer organisations to the Inquiry have expressed support for the measure.

“One insurer, Insurance Australia Group (NRMA) has implemented this comparison, but it is now time the whole industry did the same,” Professor Fels said.

The reduction in premiums due to removal of the ESL would be reduced if base premiums determined by the insurers were to rise by an unwarranted amount.

The Inquiry will be examining factors influencing base premiums, including risks and recent extreme weather events, and industry competition to ensure any proposed increases are not unwarranted.

“Today’s Inquiry is firstly and foremost about accountability. It’s a good opportunity for insurers to show what they are doing and how they plan to do the right thing by their customers when the ESL is removed 1 July,” Professor Fels said.

“The removal of the ESL from insurance policies should not be used to restore or increase insurer profit margins.

“Significant powers are in place to ensure that insurance companies do the right thing. Penalties up to $10 million apply to insurance companies who engage in prohibited activities such as false or misleading conduct.”

April

All major NSW insurance company CEOs have signed a declaration pledging that they will not apply the Emergency Services Levy (ESL) when NSW emergency services funding is removed from property insurance policies 1 July 2017.

The CEO declarations were sought by the Insurance Monitor, Professor Allan Fels AO, as part of a comprehensive oversight program aimed at ensuring policyholders fully benefit from the levy’s removal.

“Insurers must remove the ESL from polices issued after 1 July. As a result insurers need to drop prices by around 20 per cent for an average property insurance policy issued after 1 July 2017. For commercial policies, the reductions are expected to be even higher, around 30 per cent,” Professor Fels said.

“Insurance companies who fail to pass on the reduction to customers and mislead policyholders can be subject to penalties up to $10 million.”

The CEO declaration seeks to ensure insurance companies implement appropriate systems and procedures to facilitate the removal of the ESL from policies and furthermore that insurance companies do not seek to raise base premiums in anticipation of removal of the ESL.

“We have extensive powers under the legislation to monitor the insurance industry’s pricing practices and take action to protect consumers from price exploitation during the removal of ESL,” Professor Fels said.

“Over 100 insurance companies, including NSW’s largest insurers, have committed to doing right thing for consumers. I welcome these CEO declarations as a sign of intent to comply with the strong law adopted by the NSW Parliament in relation to the removal of ESL.

“When a CEO gives a public commitment like this it means their credibility is on the line. They are expected to pay even greater attention to ensuring their company is fully compliant with the law and our guidelines.”

Professor Fels said while this was a positive move; he would maintain a vigilant watch over the insurance industry during the ESL’s removal.

“Of course, the real test will be how insurers perform during and after the ESL’s removal from property insurance policies. We will not hesitate to take strong action if necessary to deal with any failures to comply,” Professor Fels said.

“We have commenced an active and comprehensive industry monitoring program, and are responding to issues raised by policyholders in their communications with their insurers. I encourage consumers to bring concerns they have about their insurer and how the ESL is affecting their policy to our attention.”

The full list of CEOs and insurance companies who have signed the declaration and the Insurance Monitor’s guidelines for insurance companies can be found at the Insurance Monitor’s website at eslinsurancemonitor.nsw.gov.au. Insurance companies and signatories (top ten market share in NSW) is located below at Attachment A.

Australia’s largest insurance companies will be compelled to provide evidence to a Public Inquiry into conduct in the insurance industry ahead of the abolition of the Emergency Services Levy (ESL) from property insurance policies after 1 July 2017.

The Insurance Monitor, Professor Allan Fels AO, under his powers called the independent Public Inquiry as a measure to safeguard NSW consumers when the NSW Government removes emergency services funding from insurance policies after 1 July 2017.

The Inquiry will focus on how insurers will ensure they pass on cost savings to consumers when the ESL is removed from insurance policies.

“Insurance companies need to pass on costs associated with the ESL’s removal in full to policyholders,” Professor Fels said.

“Penalties up to $10 million apply to insurance companies who engage in prohibited conduct such as price exploitation, false or misleading conduct – for example not disclosing full details to policyholders – or not passing on the full cost savings that policyholders are entitled to.

“The removal of NSW emergency services funding from insurance policies is not to be taken as an opportunity for insurers to pocket reductions.

“Many hardworking NSW families are struggling, and they are entitled to the full costs associated with the levy’s removal from their insurers.

“The Inquiry will examine other drivers affecting insurance costs such as industry competition, pricing and other productivity improvements.

“The removal of the ESL should not be used to restore or increase insurer profit margins. Effects on polices due to recent catastrophic weather events will also be investigated.

“Insurers will be required to explain how such factors may impact on future premiums, particularly where they coincide with the removal of the ESL.”

Professor Fels said his office had been closely monitoring insurers and responding to issues raised by policyholders in their communications with their insurers.

“The Public Inquiry is further assurance to NSW consumers that insurance companies are on notice. We are watching and monitoring a range of different factors to ensure consumers are protected during this transition,” Professor Fels said.

“I have called the Inquiry to help increase transparency over the pricing of premiums. It’s only reasonable consumers know how their policies are priced and what affects this cost so they are able to make informed decisions.”

From 1 July insurers must drop their property insurance prices by around 20 per cent when the NSW government removes emergency services funding from home insurance policies. For commercial policies, the reductions are expected to be even higher, around 30 per cent.

Public Inquiry details:

The Public Inquiry will be held from 9.30am, Tuesday 16 May 2017, at the Theatrette, Parliament House, 6 Macquarie Street Sydney. The Inquiry will be led by Insurance Monitor Professor Allan Fels AO and Deputy Insurance Monitor Professor David Cousins AM. The public and media are welcome to observe the proceedings.

Consumers can contact the Insurance Monitor to discuss concerns about their insurer and how the ESL is affecting their policy.

Further details are available from the Insurance Monitor website at eslinsurancemonitor.nsw.gov.au

March

The Insurance Monitor, Professor Allan Fels AO, has highlighted big differences in property insurance prices charged by major insurers in his latest quarterly report to the NSW Treasurer, the Honorable Dominic Perrottet MP.

An average difference of up to $1100 for basic home and contents polices was found when comparing quotes for identical properties across 11 different NSW suburbs.

The difference between the cheapest and most expensive quote in one suburb, Medlow Bath, was almost $1700 – with one insurer quoting a price more than 2.5 times higher than another.

“There are large differences in the price of insurance for similar homes, with similar risks, in the same suburb,” Professor Fels said.

“Different suburbs have different characteristics, and you would expect to see price differences across locations. But it’s very concerning there are such big differences in prices quoted for the same property. It suggests that competition is not fully effective in this industry.

“Consumers can save hundreds of dollars by shopping around each time they buy or renew their property insurance policy. However, evidence shows most don’t, and miss out on savings.

“Often cheaper prices are only available to new customers, and consumers shouldn’t assume a cheaper price this year will be the same next year.

“Insurers don’t make it easy for consumers to compare previous year’s insurance costs.

“Insurers are ignoring calls to list last year’s policy cost in their renewal insurance notices. It’s a reasonable request, and one in the best interest of the consumer. From 1 April 2017, in the UK, providing this information will be a mandatory requirement for general insurers.

“Insurers have also been very quick to oppose the establishment of independent home insurance comparison websites.

“Better and more transparent price information doesn’t mean consumers only focus on price, and no other elements of a policy. I reject the recent Insurance Council of Australia’s claim that focusing on price: ‘distracts consumers from researching policy details, such as exclusions and limits.’ It is more likely that the opposite is the case.

The Insurance Monitor was established by the NSW Government in June 2016 to oversee removal of the Emergency Services Levy from insurance prices after 1 July 2017.

“Insurers must drop residential property insurance prices up to 20%, on average, when the NSW Government removes its Emergency Services Levy,” Professor Fels said.

“The Insurance Monitor has been set up to make sure insurers do the right thing when the levy is removed and drop insurance prices. Penalties up to $10 million may apply to insurers who charge unreasonably high prices or engage in false or misleading conduct with the removal of the Emergency Services Levy.”

Attachment A

Building and contents insurance quotations, December 2016 quarter

Table 1: Insurer provided building and contents insurance quotations for December 2016 quarter (October, November, and December average)

Rand-wick

Concord

Riverview

Bradbury

Hornsby

Hinton

East Gosford

Cano-
windra

Medlow Bath

Byron Bay

Wollon-
gong

One path

$1,840

$1,711

$1,806

$1,810

$1,886

$2,380

$2,051

$2,230

$2,360

$2,046

$2,076

Cominsure

$1,710

$1,586

$1,558

$1,662

$1,615

$2,441

$1,834

$1,888

$1,531

$1,848

$1,704

AAMI

$1,772

$1,540

$1,775

$1,978

$1,490

#

$1,871

$1,076

$2,002

$1,711

$1,418

NRMA

$2,169

$2,032

$2,372

$2,115

$2,059

#

$2,217

$1,884

$2,568

$1,913

$1,702

Allianz

$1,251

$1,210

$1,234

$1,357

$1,143

$2,174

$1,422

$1,183

$1,329

#

$1,358

QBE

$1,721

$1,619

$1,752

$1,745

$1,655

#

$2,108

#

$1,723

$2,031

$2,020

IAG/CGU

$1,531

$1,551

$1,510

$1,406

$1,270

$2,658

$1,656

$1,408

$1,375

$2,219

$1,509

SunCorp

$1,930

$1,437

$1,910

$2,926

$1,600

$1,732

$2,071

$1,667

$2,325

$1,822

$1,834

Coles

$1,062

#

$1,137

$1,226

#

$1,700

$1,044

$1,916

$1,106

$1,776

$1,641

Woolworths

$1,302

$1,303

$1,205

$1,277

$1,357

n/a

$1,244

$1,923

n/a

#

$2,028

GIO

$2,211

$1,685

$2,325

#

$1,963

$2,044

$2,505

$2,061

$2,794

$2,164

$1,932

Westpac

$1,591

$1,647

$1,594

$1,592

$1,386

$1,836

$1,800

$1,707

$2,128

$1,820

$1,436

Average

$1,674

$1,575

$1,682

$1,736

$1,584

$2,121

$1,819

$1,722

$1,931

$1,935

$1,722

Max

$2,211

$2,032

$2,372

$2,926

$2,059

$2,658

$2,505

$2,230

$2,794

$2,219

$2,076

Min

$1,062

$1,210

$1,137

$1,226

$1,143

$1,700

$1,044

$1,076

$1,106

$1,711

$1,358

Max quote as a multiple of Min Quote

2.1x

1.7x

2.1x

2.4x

1.8x

1.6x

2.4x

2.1x

2.5x

1.3x

1.5x

Source: Insurer quotes provided directly to the Insurance Monitor

n/a = no result provided

# = result is considered a statistical outlier

View the Insurance Monitor’s December quarterly report and learn more about the Insurance Monitor’s role, powers and how it’s protecting NSW consumers at eslinsurancemonitor.nsw.gov.au

2016

November

Insurance companies are being put on notice that claims of profit margins being squeezed will be subject to rigorous scrutiny during the monitoring of the removal of the Emergency Services Levy from NSW insurance premiums on 1 July next year.

The Emergency Services Levy Insurance Monitor, Professor Allan Fels, has provided his second quarterly report to the NSW Government.

The Monitor is responsible for ensuring the ESL saving is passed onto insurance consumers in the form of lower premiums.

“The removal of the ESL must not be an opportunity for significant increases in base premiums. We will be subjecting the industry’s claims about premium rises to close scrutiny,” Professor Fels said.

“But there are other factors such as claim frequency and reinsurance which can have a positive or negative impact on the net cost per policy, and these will be carefully monitored.

“So far, we can see little evidence of an increase in the underlying cost of claims being experienced by insurers.”

The report also highlights complaints from consumers, indicating that insurance companies are not providing accurate information to customers. Almost all of the complaints received by the Monitor in the quarter and since indicate that insurers are not providing an explanation where there are significant increases in their premiums.

“We expect insurance companies to provide clear and accurate information to policyholders about the basis for changes in premiums, particularly for home insurance customers.

“Residential property insurance customers tend to be less informed about the detail of their policy than commercial customers, and around 30 per cent automatically renew their premiums each year.

“There is significant scope for home insurance customers to become better informed consumers.”

The Monitor is continuing to gather information about customer complaints and has requested industry bodies undertake education of their members. The Monitor is making it easier for consumers to lodge a complaint via a new online form.

October

The Emergency Services Levy Insurance Monitor, Professor Allan Fels, has put insurance companies on notice that pricing errors in relation to removal of the Emergency Services Levy (ESL) from premiums would not be tolerated by his Office.

The warning follows advice from one insurer, who had taken an early step to remove ESL from over 3,000 NSW motor vehicle and motorcycle insurance policies, but failed to reduce its total premiums to customers. The company, Swann Insurance, has now refunded customers over $17,000 and made a donation to a charity as a result of the error.

And in a further incident, the insurer’s parent company, IAG, has advised the Monitor it will pay policy holders and emergency services organisations $6.8 million after overcharging ESL in the 2013 financial year.

Professor Fels said his office had agreed to Swann Insurance making refunds to policy holders following detection of the pricing error. The insurer will be required to submit an independent review of its remediation actions to the Monitor.

“I am surprised that such a basic error in pricing was made after all the measures we have taken to make insurers aware of their obligations under the law,” Professor Fels said. “It’s vitally important that insurance companies’ systems are properly geared to fully removing ESL and passing on the benefit fully to consumers.

“Should we take court action in relation to future incidents of this kind, there are potential penalties of up to $10 million for breaching the prohibitions contained in the Emergency Services Levy Insurance Monitor Act.

“This incident highlights the importance to consumers of a Monitor the industry knows will ensure compliance with the law when it comes to removal of the ESL from insurance premiums in NSW,” Professor Fels said.

Under the NSW Government’s new system of funding fire services, ESL is being abolished from insurance premiums and replaced with an Emergency Services Property Levy from 1 July 2017.

IAG has advised the Monitor of an over-charging of ESL of $6.8 million following an internal review of ESL collections. With the agreement of the Australian Securities and Investments Commission, it intends to refund over 27,000 NRMA insurance customers an amount totaling $1.1 million, and will make payments totaling $5.7 million to various emergency services organisations. The IAG/NRMA pricing error occurred outside the period the Monitor’s regulatory powers extend to.

“It is highly unlikely however that this pricing error would have been detected had the removal of the ESL not been introduced, with strong consumer protection laws surrounding it.”

The Swann Insurance pricing error has occurred during the Monitor’s regulatory period. The Monitor in this instance was satisfied with the company's proactive response (the company self-reported the error) and considered its remediation actions to be acceptable. Swann Insurance has estimated that it will make refunds to those customers where the amount involved is over $5, and donate the total residual amount to Lifeline.

September

The Emergency Services Levy Insurance Monitor, Prof Allan Fels, has issued guidelines to insurance companies prohibiting price exploitation and false and misleading conduct in the lead up to the removal of the Emergency Services Levy from insurance premiums next year.

The guidelines set out penalties of up to $10 million for corporations and $500,000 to individuals.
Prof Fels said any moves to increase premiums on property insurance now, ahead of the anticipated removal of the emergency services levy (ESL) in July next year, would be closely scrutinised.

The NSW Government appointed Prof Fels and Deputy Monitor Prof David Cousins to protect consumers during the transition, and ensure that the ESL is genuinely removed from insurance premiums from 1 July 2017.

The ESL is worth around $800 million on the property insurance premiums of NSW homeowners and businesses. This amount should come out of the industry's revenue raised from insurance during 2017-18.“I want insurers to understand we are already closely watching to ensure they do not take early advantage of the opportunity to put premiums up as a result of the levy’s removal next year,” Prof Fels said.

“The NSW Government has provided me with extensive powers to ensure that consumers are protected in the transition, under a price oversight regime that is in place ahead of the abolition of the levy.

“We have powers to monitor back to July 2014 and to take action against unreasonably high prices from 10 December 2015 - the date the Government announced the appointment of the Monitor.

“This is some months ahead of the legislation to bring in the property based levy, and a significant departure from how the reform was done in Victoria. Having the Monitor in place early means the potential for premium increases in anticipation of removal of the levy is kept in check.”

The Guidelines state that the abolition of the levy should decrease the cost of property insurance premiums.

The Guidelines were developed in consultation with the insurance industry. The Monitor issued draft guidelines for industry feedback in early July.

In December last year, the NSW Government announced the new system of funding fire services through the abolition of the levy on insurance premiums and the introduction of the Emergency Services Property Levy.

August

Ten insurance companies accounted for 80 per cent of the emergency services levy (ESL) collected from NSW insurance consumers in 2014-15, the Emergency Services Levy Insurance Monitor, Prof Allan Fels, has revealed in a report to the NSW Government.

In 2014-15, ten out of 173 insurers collected $562 million out of a total of $715 million in ESL, which was passed on to the NSW Government to fund fire services.

The Monitor has identified competition in the insurance industry as an issue requiring close scrutiny in the removal of the ESL from insurance premiums from 1 July 2017, in its first quarterly report to the NSW Government.

It is estimated that insurers will collect approximately $800 million in revenue through the ESL in premiums from NSW consumers during 2016-17.

This should be removed from the industry's revenue raised from insurance during 2017-18.

The Monitor recently issued guidelines to the insurance industry detailing the penalties for price exploitation and false and misleading conduct - up to $10 million for corporations and $500,000 for individuals.

“The emergency services levy is worth around $800 million on the property insurance premiums of NSW homeowners and businesses. That’s what’s at stake,” Prof Fels said.

“I expect that the full impact of the removal of the ESL to be passed on to policyholders. The penalties for failing to do so are hefty.

“The NSW Government has provided me with substantial powers to obtain information from insurers.
“I won’t hesitate to take action against insurers who engage in unreasonable pricing or false or misleading conduct in relation to the emergency services levy reform.”

Prof Fels said a highly competitive industry was more likely to pass on the full benefit of the levy’s removal.

“There is concentration of market share in the insurance industry, coupled with relatively high and stable returns.

“There are low rates of customers switching insurers from year to year, and limited awareness that there are significant differences in price premiums between insurers.”

Prof Fels said the NSW Government had put in place a price oversight regime well ahead of the abolition of the levy.

“It’s important that insurance companies understand that we have powers to monitor back to July 2014 and to take action against unreasonably high prices from 10 December 2015 - the date the Government announced the appointment of the Monitor.

“This is some months ahead of the legislation to bring in the property based levy, and a significant departure from how the reform was done in Victoria. Having the Monitor in place early means the potential for premium increases in anticipation of removal of the levy is kept in check.”

In December last year, the NSW Government announced the new system of funding fire services through the abolition of the levy on insurance premiums and the introduction of the Emergency Services Property Levy.

The NSW Government appointed Prof Fels and Deputy Monitor Prof David Cousins to protect consumers from price exploitation and ensure that emergency services levy is genuinely removed from insurance premiums from 1 July 2017.

Consumer advocates Professor Allan Fels and Professor David Cousins AM have released their first report as NSW’s Emergency Services Levy Insurance Monitors, warning insurance companies face hefty fines if they do not pass savings onto customers.

As announced in December 2015, the NSW Government will replace the insurance-based Emergency Services Levy (ESL) with a fairer Emergency Services Property Levy (ESPL) to be paid by all property owners alongside council rates from July 2017.

“The work of Prof Fels and Prof Cousins will be critical in ensuring that insurers pass on the benefits of abolishing the ESL to households and businesses through lower insurance premiums,” Ms Berejiklian said.

The vast majority of insured residential property owners are expected to be better off under the ESPL with the average insured property owner saving about $40 a year on their policy. The ESPL will be budget neutral and will not raise any extra revenue for the Government.

“Our job is to protect consumers and ensure that insurers pass on savings,” Prof Fels said.

“Penalties up to $10 million can apply to corporations and $500,000 for individuals if insurance price exploitation is found.

“These sanctions apply equally to any person who aids, abets, counsels or procures another person to engage in prohibited conduct, induces another person to engage in this conduct, or conspires with another person to do so.”

July

Tuesday, 5 July 2016

Media Release: Treasurer, Minister for Industrial Relations.

Insurance companies that do not pass on the benefits of the Government’s new Emergency Services Property Levy (ESPL) to households will face fines of up to $10 million, NSW Treasurer Gladys Berejiklian and Emergency Services Levy Insurance Monitor Alan Fels announced today.

Professor Fels and Deputy Monitor, Professor David Cousins AM, two of Australia’s most respected consumer watchdogs, will be responsible for protecting consumers against unreasonable pricing and ensuring insurance companies pass on savings to their customers as the NSW Government rolls out a fairer system of funding fire and emergency services.

The Government announced in December that the insurance-based Emergency Services Levy (ESL) would be abolished and replaced with the Emergency Services Property Levy (ESPL), to be paid alongside council rates from 1 July 2017.

The fairer system will mean all property owners will contribute to fire and emergency services – putting downward pressure on insurance premiums and helping to reduce NSW’s high rates of underinsurance.

“Professors Fels and Cousins will be our ‘cops-on-the-beat’ to ensure savings are passed on to households as the Government undertakes this important reform,” Ms Berejiklian said.

“It is absolutely imperative that insurance companies do the right thing and pass on the tax reductions in full,” Professor Fels said. “The aim is to totally eliminate the burden of the current tax on consumers and businesses.”

The Monitor has today released draft guidelines to the insurance industry governing the abolition of the ESL, with penalties for prohibited conduct of up to $10 million for corporations and $500,000 for individuals.

The Government anticipates that the vast majority of insured residential property owners will be better off under the ESPL, with the average insured property owner saving around $40 per year. The changes will bring NSW in line with all other mainland states. The ESPL will be budget neutral and will not raise any extra revenue.

June

NSW has moved a step closer to a fairer system of funding fire and emergency services, with legislation to make way for the Emergency Services Property Levy (ESPL) passing Parliament overnight.

The Government in December announced it would abolish the insurance-based Emergency Services Levy (ESL) from 1 July 2017 and replace it with the ESPL, to be paid alongside council rates.

The Monitor will be responsible for ensuring that insurers pass on the benefits of abolishing the ESL to households and businesses, in the form of lower insurance premiums.

Professor Allan Fels AO and Professor David Cousins AM have been appointed as the Emergency Services Levy Monitor and Deputy Monitor.

"There can be no stronger advocates for ensuring the savings are passed on to households and I am thrilled that Professors Fels and Cousins will be leading this process," Ms Berejiklian said.

"Under the new system, all property owners in NSW will contribute to the cost of our essential and valued fire and emergency services through the ESPL.

"The change will also help address the serious issue of underinsurance in NSW by improving the affordability of insurance for property owners. The Emergency Services Levy Insurance Monitor will play a critical role in ensuring customers receive these benefits."

Prof Fels and Cousins performed the same roles in Victoria, when the state underwent a similar transition from an insurance-based levy based on the recommendations of the 2009 Bushfires Royal Commission.

The Emergency Services Levy Insurance Monitor will be charged with working closely with the insurance industry to oversee the transition to ensure that insurance premiums are reduced in line with the savings.

The Monitor will set guidelines, deal with customer complaints, and take enforcement action against any insurers not passing on the savings to customers. The Monitor may seek to impose fines of up to $10 million where insurers engage in prohibited conduct.

"The existing insurance levy increases the cost of insurance by around 20 per cent for residential policies and 40 per cent for commercial policies," Ms Berejiklian said.

"Abolishing the insurance-based levy will reduce the cost of insurance premiums, enabling more people and businesses to take out insurance to protect their properties from fire, floods, storms and other natural disasters.

"This fairer system will also bring NSW in line with all other mainland states, which have already moved away from an insurance-based levy to a property-based levy."

Today the Government has also launched a new website to provide information around the change to how the levy will be collected and what this means for NSW residents: www.emergencyservicespropertylevy.nsw.gov.au

2015

December

Thursday, 10 December 2015

Media Release - Minister for Emergency Services

NSW will move into line with all other mainland states and introduce a fairer system of funding fire and emergency services that will also help reduce the high levels of underinsurance across the State, Treasurer Gladys Berejiklian announced today.

From 1 July 2017, the NSW Government will abolish the Emergency Services Levy (ESL) on insurance policies and replace it with an Emergency Services Property Levy (ESPL), paid alongside council rates.

The reform will mean the burden of funding these services will no longer fall only on those with property insurance but all landowners.

"Under the current funding model, NSW property owners who insure their properties are subsidising households who don't purchase contents or building insurance," Ms Berejiklian said.

"Fire does not discriminate and the community rightly expects that firefighting and SES services will be available to everyone in their time of need. It is also fair to expect all property owners to pay their share for these vital services."

The Government anticipates that the vast majority of insured residential property owners will be better off under the ESPL, with the average insured property owner saving around $40 per year.

Modelling suggests property insurance premiums will fall by around $200 on average every year under the change while the average cost of the ESPL will be around $160.

The ESPL will be budget neutral and will not raise any extra revenue for NSW.

"This fairer model for funding fire and emergency services will reduce the cost of insurance and encourage more people to insure their properties," Ms Berejiklian said.

The introduction of the ESPL will not in any way reduce levels of funding to the State's fire and emergency services.

"This long overdue reform has been recommended by recent reviews into State taxes, including the Henry Review, and shows the NSW Government is committed to tax reform," Ms Berejiklian said.

The Government will also appoint Professor Allan Fels AO as Emergency Services Levy Insurance Monitor to ensure that insurers pass on the cost savings to consumers. Prof Fels will have powers to seek pecuniary penalties from Insurance Companies of up to $10 million for unreasonable prices from today through to 31 December 2018. Professor David Cousins AM will also be appointed as Deputy Monitor.

Minister for Emergency Services David Elliott said the ESPL will support the State's emergency services and ensure they have the resources they need to protect homes and save lives.

"The safety of our communities is what matters most and our frontline emergency service workers will show up at your house regardless of whether you are insured or not," Mr Elliott said.

"This reform will ensure we all share the cost of that life-saving service."

Following extensive public consultation in 2012, the NSW Government will now consult with key stakeholders, such as the insurance industry and local government, on the implementation of the reforms.

The new levy will be based on unimproved land values and will be collected by local government on behalf of the State. Different property-levy rates will be applied to different categories of land. The Government is considering appropriate land classifications such as residential, commercial, farmland and public benefit land.

Victoria abolished its insurance-based fire services levy and introduced a property levy in July 2013 - a reform prompted by recommendations of the Royal Commission into the 2009 bushfires with the goal of reducing the level of under-insurance.

Legislation to enact the reforms will be introduced in the first half of 2016. There will be discounts in place for pensioners and concession cardholders.